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2008 (2) TMI 501 - AT - Income TaxDisallowance of Expenditure on interest and processing charges - consistently following a 'modified project completion method' of accounting during earlier years - Applicability of the decision of the Tribunal (Special Bench) in the case of Wall Street Construction Ltd. v. Jt. CIT [2005 (9) TMI 228 - ITAT BOMBAY-F] - HELD THAT:- Admittedly, in earlier years, the claim of the assessee in respect of the expenditure of interest was allowed by the AO without any interference. Also, we are conscious of the fact that the issue involved before us, in this year, is only about interest and processing charges and that there is no dispute about the balance of the interest expenditure which was claimed by the assessee as period cost, by debiting it to P&L a/c, and allowed by the AO. If we sustain such an inconsistent action of the AO we will be giving our approval to a totally anomalous situation, which is devoid of any logic. To conclude, our decision in the present case is based on four considerations, one, the decision of the Tribunal (Special Bench) in the case of Wall Street Construction Ltd. is not applicable to the facts of the present case, two, the method consistently followed by the assessee and accepted by the AO during earlier years could not be interfered with, without valid reasons, three, the AS I mandates that 'consistency' was a fundamental accounting assumption, and four, the action of the AO, in disallowing interest and processing charges suffers from inconsistency and arbitrariness, and is devoid of any logic. The ground Nos. 1, 2, and 4 are, accordingly, rejected. Addition made under s. 41(1) - unpaid brokerage liability - HELD THAT:- The provisions of sub-s. (1) of s. 41, inter alia, provide that, where an assessee, who had been allowed deduction in respect of any expenditure or trading liability, obtains any amount in respect of such expenditure or any benefit by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him is deemed to be profits and gains of business. Here one has to remember that the 'receipt' of amount or benefit is a necessary condition, and there is no material on record to show that this condition is fulfilled in the present case. This is a deeming provision which has been invoked by the AO on mere assumption. Therefore, we are agreement with the conclusions reached by the CIT(A). These grounds are accordingly rejected - In the result, the appeal filed by the Department is dismissed.
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